Wednesday, April 24, 2013

Gains and losses

We’ll file this story in the ‘it’s easier to know what you should do, than to do what you should do’ case studies folder.  After a very successful trip to Wharton for their visit day, I’ve been sitting on about $170 of expenses that I can get reimbursed.  Clearly I went home and mailed the forms within a week of my visit, right?  Totally wrong.  I was supposed to submit the form within 30 days of the visit, and it's now exactly 29 days past.  I just mailed the damn reimbursement.  Frankly, I think this is a pretty good illustration of how our brains code gains and losses.

So, $170 is enough money that even if forms are a pain to fill out and take 20 minutes, I would effectively be making $360/hour by filling them out. So it's not a miniscule or insignificant amount.  On the surface, I'm owed $170, but in reality it feels pretty different from a situation where, say, a friend borrowed 170 bucks from me.  I've already paid for the Amtrak tickets and meals during the visit, so it's a choice about whether I want to earn $170 through 20 minutes of work, or not.  It's largely accepted that most humans code gains and losses differently -- as great as winning $100 is, losing $100 feels way worse in magnitude than the greatness of winning that same amount feels.  So whereas getting reimbursed is the choice between losing $170 and losing nothing, it truly feels like I'm choosing between gaining nothing and gaining $170.

Damn you brain, your framing makes me even more lazy than usual!  The framing example below is one of my favorites (take a look and see if your brain falls for the framing):

Imagine that the U.S. is preparing for the outbreak of an unusual Asian disease, which is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Assume the exact scientific estimate of the consequences of the programs are as follows 

Which of these two scenarios would you pick?
  • Program A: "200 people will be saved"
  • Program B: "there is a one-third probability that 600 people will be saved, and a two-thirds probability that no people will be saved
Which of these two scenarios would you pick?
  • Program C: "400 people will die"
  • Program D: "there is a one-third probability that nobody will die, and a two-third probability that 600 people will die"
 In Kahneman and Tversky's study, 72% preferred Program A (to B).  As well, 78% preferred Program D (to C).  What's crazy is that programs A and C are identical, as are programs B and D.  So we're picking a different options based solely on how the problem is presented!

I also want to add a quick update on my cellular situation: when we last saw our intrepid hero (me!) I had switched to a Verizon MVNO -- essentially a company that sells access to Verizon's data and wireless at wholesale prices.  (You can see more in my original post:

Well, I've happily settled on a slightly more expensive plan ($30/month, no contract) that gives me 1200 minutes, 3000 texts, and 250 MBs of data.  The text & minute limits are rad -- I can't see myself ever going over them (provided I don't suddenly become super popular, but I think I'm safe from that).  I've found that for me, 250 MBs for data is plenty -- I spend a lot of time at home where I can use wifi, or in public places with free wifi, and checking email and facebook whenever I'm not in one of those places, or using my googlemaps app to map out a walk whenever I want, is so far taking up less data than I have.  Hooray!  My early termination bill from Verizon was definitely painful, but my phone and I are now very happy.  As a bonus, I've found that the act of having to push the 'turn on cellular data' button is enough to keep me from mindlessly and obsessively checking facebook 15+ times a day on my phone.  Now I check less than 10 times a day ... usually. ;)

How crazy is framing?  Have you ever turned down free money and not filed an expense report (I'll plead the 5th)?  As always, if you have any questions about escaping an expensive phone plan, I'm happy to help if I can!


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